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RME premium to gasoil futures falls to 31-month low on bullish gasoil

Increase font size  Decrease font size Date:2018-01-11   Views:494

The RED RME premium to front-month ICE gasoil futures fell to a greater than 31-month low Tuesday, on bullish gasoil, which rose $4.75/mt day on day.

S&P Global Platts assessed the RME premium to front-month ICE gasoil futures at $314/mt Tuesday, down $11 on the day, its lowest value since June 9, 2015, when it was assessed at $308/mt, on stronger gasoil, despite bullish vegoils and tight prompt production margins.

Front-month ICE gasoil futures rose to $605.50/mt Tuesday, just below the $607.75/mt on January 4, a 32-month high, underpinning much of the moves.

Increased imports of SME into Europe since the reduction of the Argentinian antidumping duties in September have driven down production margins, as stock levels have built up. This, coupled with a stronger euro in recent weeks, has commuted margins.

Subsequently, the RME-FAME 0 differential reached a three-month low Tuesday, on the falling RME values, which were compounded by bullish FAME 0 outright and premium prices.

The RED FAME 0 premium to front-month gasoil futures rose $8 to $245/mt Tuesday, on aggressive bidding on the prompt physical and increased demand.

S&P Global Platts assessed the RME-FAME 0 differential at $69/mt, down $19 day on day, to the lowest level since October 2017.

"The RME-FAME 0 differential is looking seasonal," a source said, referring to the demand switch from RME to FAME 0 moving towards the summer, as the superior cold properties of RME are no longer required.

"The market is hesitating -- maybe it will pick up on RME for February or March," said another source, anticipating a widening again for the differential before it reaches summer levels.

Other FAME blends are also in focus at this point, such as minus 5 and minus 10, as winter continues to tighten its grip in Europe. These are in direct comparison with RME, depending on blenders requirements, and as such demand for low CFPP (Cold Filter Plugging Point) biodiesel is split.

RME demand however is remaining as a blendstock for these other FAME blends, but it is the weakening of the pure RME demand that has caused some of the downward move.

This has been further facilitated by the increased blendstocks, such as the SME flow from Argentina, which has enabled the use of low FAME blends, in contrast to the previous year, when imports of SME were virtually non-existent.

Some of these imports of have moved directly to the Mediterranean which has displaced some biodiesel demand there, having knock-on effects on the European biodiesel sphere.

The biodiesel market globally has also adopted a generally bearish sentiment, as vegoil stock levels ramp up across the world, despite prices firming.

This is clearly visible with palm oil stocks in Malaysia rising above 2.73 million mt in December, surpassing the 2.5-2.7 million mt predicted by analysts.
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